A Dynamic Accumulation Model for the Second Pillar of the Slovak Pension System
AbstractSince January 2005, pensions in Slovakia are operated by a three-pillar system as proposed by the World Bank. This paper concentrates on the mandatory, fully funded second pillar. The authors present a dynamic accumulation model for determining the optimal switching strategy among pension funds with different risk profiles. The resulting strategies depend on the individual risk preferences of future pensioners. The authors´ results illustrated that gradual decreasing risk while amassing savings for a pension is rational. Furthermore, the authors present several simulations of optimal fund-switching strategies for various model parameter settings.
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Bibliographic InfoArticle provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.
Volume (Year): 56 (2006)
Issue (Month): 11-12 (November)
Bellman equation; dynamic stochastic programming; funded pillar; pension portfolio simulations; risk aversion; Slovak pension system; utility function;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
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